July 2, 2012 6:00 PM

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Investors should bear burden of 12 per cent service tax: MF industry

The mutual fund industry wants the consumers to bear the burden of 12 per cent service tax on purchase of schemes and has also pitched for higher administrative expenses.Association of Mutual Funds of India (AMFI) CEO, H.N. Sinor told reporters after the meeting of the representatives of the mutual fund industry with the government officials in New Delhi on Monday that Service tax should be borne by consumers and should be kept out of the total expense ratio. On the issue of re-introduction of commission for brokers, also known as entry load, he said, the MF industry did not believe in reviving the issue.Department of Economic Affairs, DEA Secretary R Gopalan said ,there are issues of short term and taxation nature. Those are to be fast tracked. He said there was a need to work out a balance so that the industry grows.The entry load of 2.25 per cent which was paid as commission to distributors of mutual funds, was banned in 2009 by the then SEBI chief C.B. Bhave, who felt that investors were being taken for a ride by distributors who encouraged investors to churn their portfolios. The ban, however, led to drying up of inflows into mutual funds.AIR correspondent reports, the meeting comes close on the heels of Prime Minister Manmohan Singh's statement last week that mutual fund industry was in problems and something was needed to be done to resolve their issues. The issues like allowing mutual funds to float pension schemes, provision of tax relief on such products at par with other life insurance schemes and more benefits for those players who wish to provide services in smaller towns were also discussed during the meeting.

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